Barclaycard has slashed credit limits by thousands of pounds, leaving some customers who have been with it for decades with far less purchasing power than before.
Credit card limits are tailored to individuals. People with higher incomes and good repayment history can usually borrow more. However, limits can be cut if your circumstances change or you default on repayments.
However, Barclaycard reduces how much customers can borrow even if they have never missed a payment.
Barclaycard reduces how much customers can borrow even if they have never missed a payment
This is the second time in the past 12 months that Barclaycard has cut credit limits after the bank did so last July.
Matthew Gooch, 42, has had a Barclaycard for 24 years and was previously able to borrow up to £ 9,000. But last month the provider wrote that it would reduce its limit to £ 2,050.
The university worker’s income has increased over the past year and he has spent less on his card than in previous years.
Barclaycard employees couldn’t tell why the company was lowering its limit. After calling to complain, his limit was instead reduced to £ 4,500.
Matthew from Norwich says: “I feel completely disappointed.”
The move is also strange in that Barclaycard has been distributing longer interest-free transfer terms for credit balances to customers in recent months.
Several other Barclaycard customers have complained about the cuts on social media.
One who spoke to This is Money, Louise Porter, shared a letter on Friday saying that her limit was lowered from £ 11,900 to £ 1,650, a reduction of more than 86 percent.
Louise, 42, from Hampshire said she hadn’t missed a payment in 20 years and paid the balance whenever she used it.
“I have to sometimes have to use it for a big one-time payment and then pay it off over a year or so and manage to do that without getting oversubscribed,” she said. “This is out of nowhere and not based on any evidence of how I managed my account or my finances.”
In the letter she had received, she was told that the discount, which would take place on May 20th, was to ensure that her card was affordable for you.
A letter from a Barclaycard customer states that her credit limit has been lowered by 86% to make sure it’s affordable for you, even though she hasn’t missed a payment in 20 years
It added that she could review the change if she sent in an updated income statement, be it a bank statement or a payroll.
“Annoyingly, I had planned to do some big shopping later in the year and that’s a bit of work in the works,” said Louise, who couldn’t reach anyone at Barclaycard.
“It’s annoying to have to provide evidence and not know what criteria you are using or what you will decide in the end. I think the affordability argument they use is a smoke screen to weed out unprofitable customers. ‘
It’s annoying to have to come up with evidence and not know what criteria they are using or what they will decide in the end. I think the affordability argument they use is a smoke screen to weed out unprofitable customers.
Louise Porter, Barclaycard customer
The average credit limit in the UK fell 49 percent from January to December last year, according to credit scoring firm ClearScore.
Justin Basini, CEO of ClearScore, said, “With the end of support packages like payment holidays and vacation programs, some credit card providers have lowered credit limits even further to protect themselves from people who may not be able to repay money borrowed from them . ‘
Barclaycard’s UK revenue fell 24 percent to £ 1.514 billion in 2020 “as lower borrowing and spending by customers resulted in lower interest income on loan balances.”
Figures from the Bank of England and UK Finance have shown UK credit card balances plummeting record amounts during the pandemic, with consumers unable to spend.
Bjorn Svenson tweeted that the company “immediately removed £ 7,000 from my credit limit for no reason.” When asked by This is Money why his limit was lowered, he replied, “I have no idea at all.
A Barclaycard customer was told earlier last month that their credit limit had been lowered after the bank raised it repeatedly without asking
“I’m self-employed, have a stable income with no drop in wages, never missed a payment and always pay above the minimum, with about £ 4,000 on the card and £ 7,500 left.
“You have now lowered the limit by £ 7,000 for no reason other than responsible lending.”
He added, “I’m just glad I’m under the new credit limit. I’m sorry for the thousands of pounds over the new limit who have a month to clear it up before being charged. ‘
Barclaycard will charge £ 12 when customers exceed their credit limit.
In contrast, Santander and Virgin Money say they are not reducing any of their customers’ credit limits to help those who have been hit hard by Covid-19.
Last year, Virgin Money caused a similar backlash when it suspended the credit cards of thousands of customers during the country’s initial lockdown, many of whom had never missed a payment.
The bank changed its mind less than 48 hours later after the Financial Conduct Authority frowned upon it.
A Barclaycard spokesperson declined to say how many customers have reduced their limits, adding, “As a responsible lender, we continuously monitor and adjust our cardholders’ credit limits to ensure they are not borrowing more than they can themselves can comfortably afford. “
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